Explainer: Fed funds futures market sees negative rates by next April

  • 📰 ChannelNewsAsia
  • ⏱ Reading Time:
  • 70 sec. here
  • 3 min. at publisher
  • 📊 Quality Score:
  • News: 31%
  • Publisher: 66%

United States News News

United States United States Latest News,United States United States Headlines

The fed funds futures market is pricing in negative U.S. interest rates next year, a scenario the Federal Reserve has said it wants to avoid as ...

The fed funds futures market is pricing in negative U.S. interest rates next year, a scenario the Federal Reserve has said it wants to avoid as many doubt that it would be an effective tool to stimulate growth.

The U.S. central bank slashed the federal funds rate to near zero in March and has launched numerous programs aimed at boosting liquidity and stabilizing financial markets as the U.S. economy reeled from the coronavirus pandemic.Not necessarily. Futures indicate market expectations, but those can change. Futures markets are also highly technical. They will not necessarily reflect what the effective fed funds rate that is bounded by the Fed's target rate will be. It is currently 0-0.

A negative rate policy requires financial institutions to pay for depositing excess reserves with the central bank. By effectively penalize financial institutions for holding their cash, central banks encourage them to lend more. There are limits as to how deep central banks can push rates into negative territory. Investors can avoid being charged negative rates on deposits by choosing to hold cash instead.Negative rates compress the margin that financial institutions can earn from lending. If rates stay negative for long, financial institutions could stop lending, hurting consumers and businesses and eventually damaging the economy.

The non-partisan Congressional Budget Office said last month it expects the U.S. federal deficit to nearly quadruple to a record US$3.7 trillion this fiscal year, as the country combats the effects of the coronavirus outbreak.

We have summarized this news so that you can read it quickly. If you are interested in the news, you can read the full text here. Read more:

 /  🏆 6. in US
 

Thank you for your comment. Your comment will be published after being reviewed.
Please try again later.

United States United States Latest News, United States United States Headlines

Similar News:You can also read news stories similar to this one that we have collected from other news sources.

Ford's China ventures saw sales growth in April as market reboundsU.S. automaker Ford Motor Co's two ventures in China have reported year-on-year sales growth for April, indicating the world's biggest auto ...
Source: ChannelNewsAsia - 🏆 6. / 66 Read more »

Uber sees ride business up from coronavirus lows in some US marketsUber Technologies Inc said on Thursday it saw encouraging signs in markets hit by the coronavirus epidemic as it posted a 14per cent rise in ...
Source: ChannelNewsAsia - 🏆 6. / 66 Read more »

China's Kingsoft sees stock pop in US market debutREUTERS: Shares of China's Kingsoft Cloud Holdings Ltd jumped over 25per cent on its U.S. market debut, indicating strong investor interest at a ...
Source: ChannelNewsAsia - 🏆 6. / 66 Read more »